Among the things that are very painful is the taxpayer’s few realizations after filing a tax return prior to realizing that they forgot to include some deductions that would have otherwise reduced their tax bill or maximized their tax refund. Rushing to complete the tax return by the deadline, is something that can really cost you big time. It is common for you to forget avenues that should reduce your tax income. According to the accountants who handle the tax returns and questions, they have indeed confirmed that numerous citizens do not really get what the country owes them since most of the tax deductions are overlooked. Below are some tax deductions you need to know about. From home mortgage to your college education, ensure that you’re not getting unfairly taxed!
Child care credit
For tax purposes, those under the age of 13 are considered “children”. Thereby, they are entitled to tax deductions of between 20% and 30% of the total amount of money used for their care expenses. If you are a parent of young children and have been spending some money for their day care, you should claim a tax deduction with immediate effect. Most people fail to claim this as they confuse personal exemption and child care tax credit. Child care credit reduces the liability of the actual tax while personal exemption is a deduction which minimizes taxable income without really reflecting the same net effect.
Jackson Hewitt’s chief tax officer, Mark Steber says that, regardless of whether you entered marriage or got divorced in the yester taxable year, change in lifestyle impacts heavily on your tax return. Does that amaze you? Believe me, you are not the only one. “We see a lot of people miss credits and deductions related to life changes. For example, some clients get divorced and do not realize you can file Head of Household instead of Single, with better deductions and a lower tax rate schedule.” He said. Therefore, if you fall under any of these circumstances that is considered a lifestyle change, include that in your tax returns!
Student loan interest serviced by parents
If you are a parent who is paying for the student loans and education of your child, you need to be attentive to this point in particular. The principal of Poulos Accounting & Consulting, Inc. in Atlanta, Georgia, Andrew Poulos says, “Student loan interest is deductible by an individual who qualifies to deduct the interest.” He further advises that when a parent takes care of their kid’s student loan, IRS assumes that the parent gave the money to the child for them to pay for the loan. This should not be the case, as by so doing, you cannot get a tax deduction. The wisest thing to do is, stop claiming your child as a dependent on you as the parent. Just like the children fill the forms for application student loans alone, let them pay the loan on their own as independent individuals. When they pay the money as independent individuals, then they have the ability to claim as much as $2,500 tax returns annually.
American opportunity credit
This one belongs to students who are not yet through with their first four years of higher education, which generally encompasses an undergraduate degree. According to Poulo, this is a tax credit and, therefore, it is meant to minimize the tax liability’s bottom line dollar for dollar. For every student who qualifies, the maximum credit is $2,500.
Your first job moving expenses
Your first real job out in the workforce is exciting, albeit a little daunting. Once you get over the novelty and the nerves, you will realise that a tax deduction opportunity presents itself. With a tough job market nowadays, it’s not uncommon to have to relocate (whether it’s the city next to yours, or across the country) to work. This holds particularly true for fresh college and university graduates who do not have as much experience behind them. So while expenses for job hunting are not deductible, expenses for moving for work sure are!
Failing for file
In each and every society, we must have high income earners and low income earners. That is a fact of life. With everyone trying their best to climb to the top and be high income earners, there is something about low income earners that is overlooked. This is the first good thing that I have come across about earning less below a certain level. However, before celebrating about this, you should also remember that this can cost you a potential tax break as you need to start filing your taxes prior to qualifying.
Airline tips and fees
If you are moving for business reasons being a self-employed individual, you can now start filing for tax deductions on baggage tips and fees as they are travel expenses that are tax deductible. Is this one not fun? This also includes hotel expenses, so you should probably start keeping a record if you aren’t already, if you fall under this category.
Professional tax prep help
Bearing the costs of hiring an outside accountant never comes cheaply, as we all know. However, this is an expense that will service itself partially. This will only happen when you record the fees in your yearly deductions. You only need to itemize the deductions for paying for tax preparation. This will go a long way to reduce your tax bill.
Energy efficient home improvement credits
It really pays to be an extraordinary homeowner who takes great care of his/her environment including property value improvement. Such homeowners get a chance to enjoy special tax credits, which aren’t available to all. These tax deductions are non-business energy property credits. However, even if such offers are set to expire after a certain duration of time, sometimes they get extended, favoring the extraordinary home mortgage owners.
Don’t get taxed more than you should be!
These are some of the tax deductions that you should be aware of, for you to reduce your tax bill. Some or even all of them are usually overlooked mostly due to ignorance. This as a result means that the money that should otherwise be deducted does not help the owners, but instead is left with the country that continues sucking more tax from the citizens.
Sourced from: She Knows
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